The rule against hearsay does not only impact oral statements—it also applies to written documents, and, unless the proffered evidence falls within one of the multitude of hearsay exceptions or statements that are otherwise categorized as nonhearsay, it is inadmissible in court. One of the most well-known and frequently relied upon exceptions is the “business records exception” found in Federal Rule of Evidence 803(6). Under FRE 803(6), a business record is admissible if “(A) the record was made at or near the time by—or from information transmitted by—someone with knowledge; (B) the record was kept in the course of a regularly conducted activity of a business, organization, occupation, or calling, whether or not for profit; (C) making the record was a regular practice of that activity; (D) all these conditions are shown by the testimony of the custodian or another qualified witness, or by a certification that complies with Rule 902(11) or (12) or with a statute permitting certification; and (E) the opponent does not show that the source of information or the method or circumstances of preparation indicate a lack of trustworthiness.”
In other words, first, the record cannot have been made in preparation for or as part of the litigation, because such records may likely be inherently untrustworthy or biased, and, second, the record’s custodian must attest to this fact.
In every foreclosure in which “securitization” is stated or lurking in the background, the sole witness at trial and the persons who are tasked with executing affidavits or “certifications” are relaying entirely on written documents. None of them have any personal knowledge of any transaction about which they are testifying.
Those written documents are produced at trial as “business records” mainly because the witness testifies that they are business records. But if they’re not business records and are merely reports produced for the purpose of foreclosure then they must be excluded under the rules governing hearsay evidence. If the proponent of the hearsay wishes to prove the truth of the matters asserted to be true in the reports generated for foreclosure, it must do so in some other way.
The basic mistake by anyone defending a foreclosure is to assume that the witness is employed by a company that handles payments and disbursements. The payments come from homeowners and the disbursements go to the creditor(s). But the moment you demand discovery about the receipt of payments or disbursement of proceeds you get crickets, objections, and double talk arguments from the lawyers who say they represent the named designated claimant or plaintiff (but who in fact have never spoken with anyone at the named designated claimant or plaintiff).
The reason is simple: the company whose name is being used and promoted as “Servicer” does not handle the money in any manner, shape, or form. Why is that important? If they don’t handle the money, then they are not making the data entries about the receipt or disbursement of the money. It is simple logic. How could they memorialize an event in which they did not participate? If they’re producing reports from third parties who did witness the events, then the “servicer” reports are hearsay. The only competent witness is someone who did witness the transactions.
So if the business records exception to the hearsay requires that the data entry be made “at or near the time by—or from information transmitted by—someone with knowledge,” then the witness for the company claiming to be servicer should not be allowed to testify and is any such testimony is subject to a motion to strike if timely made. But they do testify all the time and their “records” (which are really reports of data received from third parties) are most often admitted into evidence, thus sealing the doom of the homeowner.
There are two reasons for this phenomenon. The first is that there is no well-founded and timely objection from the homeowner. The second, more subtle reason is that once you tacitly or expressly admit the company is a service, most of your objections must be overruled. You have waived the essential truth — that the company is not a servicer.
A third reason is that lawyers have successfully argued that the companies claiming to be servicers received the information from “someone with knowledge.” They argue that even if that knowledge came from a third-party company that is not present or represented in court, that the out-of-court declarations of that third party are still an exception to the rule against hearsay. The obvious argument against that theory is that all out-of-court statements are made by people who profess to have knowledge and therefore there would be no hearsay rule barring such statements from evidence.
So if the business records exception to the hearsay requires that the data entry be “kept in the course of a regularly conducted activity of a business, organization, occupation, or calling” the reports of the company that is proclaimed “servicer” do not qualify for exception unless it did in fact operate a business in which payments were in fact collected and then disbursed to the creditor(s). The absence of such activity should be fleshed out in discovery.
Don’t be confused by the fact that the checks were made out in the name of the company claiming to be a servicer. It is perfectly possible for me to ask you to issue checks in my name and send them to a P.O. box that is not owned or operated by me or on my behalf, which are then deposited into accounts that are not owned by me or operated on my behalf and actually the behest of yet another third party (in this case an investment bank). The people or machines that handle such deposits do not work for the claimed “servicer.” Nobody in their right mind would ever entrust trillions of dollars to thinly capitalized entities — and they never did.
The proof of the pudding lies in disbursements. Servicers have no record of disbursements because they never made any disbursements. They never made any disbursements because, as stated above, they never received the money to make any disbursements.
So if the business records exception to the hearsay requires that “making the record was a regular practice of that activity,” the exception fails again. But the issue is clouded by the fact that the activity of the company claiming to be a servicer was to print out reports from third parties. So it was the product of an activity conducted by the company. but it wasn’t THE activity of receiving or disbursing money.
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But challenging the “servicers” and other claimants before they seek enforcement can delay action by them for as much as 12 years or more.
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Yes you DO need a lawyer.
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If you wish to retain me as a legal consultant please write to me at neilfgarfield@hotmail.com.
Filed under: foreclosure |
The problem is not just the current “Servicer” hearsay records, but also the prior “Servicer” records that went to the current “Servicer.” This is the crux of CFPB appeal in their case against Ocwen. Records from prior servicer, as claimed by CFPB, are erroneous, but Ocwen failed to verify, and proceeded on incorrect and missing information. District Court dismissed CFPB case because judge claimed “res judicata” by CFPB settlement with Ocwen in 2014. Further, judge claimed the Monitor found no errors (in required 3 years of monitoring) by metric mandates of the settlement. CFPB rightly claims – 1) Their case is only from 2014 2) the Monitor based his monitoring on false records. The judge stated that CFPB should have known in 2014 that the records from prior servicers were bad. Not an easy task with massive settlements by the government So — need prior servicer records. Ocwen indeed bases on hearsay from prior servicer records. But, most of those prior servicers are defunct with servicing sold to Ocwen (and others). In effect, all is hearsay.